USPS Facilities Closures: The Odyssey Continues

A plan to close hundreds of postal facilities and eliminate overnight delivery of first-class mail would not save as much as the U.S. Postal Service (USPS) has projected—according, at least, to the Postal Regulatory Commission (PRC), which came to this conclusion in an advisory opinion released last Friday (September 28, 2012). The PRC’s analysis of the USPS Mail Processing Network Rationalization (MPNR) initiative, which initially aimed to save $2.1 billion (a figure later adjusted to $1.6 billion) by closing and consolidating 229 of its 461 processing plants, actually may save as little as $46 million annually. The PRC also determined that the Postal Service could “significantly reduce its network and realize significant cost savings while preserving most current service levels.”

The analysis focused on network modeling, cost savings estimates and estimates of potential volume loss. It concluded that in order to capture the anticipated $1.6 billion in cost savings upon full implementation of MPNR, USPS would have to improve average systemwide productivity by more than 20% and noted that “improvements of this magnitude are ambitious and involve some risk.”

As we reported back in June, USPS has been shrinking and planning for further downsizing—including the closing of retail facilities and processing plants, as well as the reduction of service standards—for years. In July, USPS began a two-phase implementation of MPNR with interim service standards that would preserve overnight first-class mail service (with the exception of mail that is handled by more than one processing plant) until January 31, 2014, and consolidate 140 plants.

The first phase is being implemented in two stages, the first of which was scheduled to include the consolidation of 48 facilities this past summer (though we don’t know if that was fully implemented). The Postal Service then suspended consolidations from September through December, during the busy election and winter holiday mail periods; consolidations will resume in January 2013 with the second stage of Phase I, in which about 92 additional facilities will be consolidated. Phase II will begin implementation in January 2014 with another 89 or more facility consolidations, bringing the total number of consolidated facilities to about 229.

“The Commission believes that the phased implementation of MPNR provides an excellent opportunity for the Postal Service to study the effects of service standard changes; to inform its decisions on how to preserve as much of the current services as possible; and to make adjustments before full implementation,” added PRC Chairman Ruth Y. Goldway.